Thinking again about the Summit and talk of changes to the current taxation system made me wonder if OLO contributors had any ideas that might improve our current system of taxation. Our own mini-Summit on taxation.

I am no expert on this but thought that a fairer taxation system might also be developed to assist with goals of sustainability. That is, those who consume more pay more.

At the moment the highest income earners and corporations can still legitimately avoid tax to some extent via tax havens and investments while middle Australia carries the greatest burden.

Would it work to increase the rate of GST on luxury items (not essentials of course) to about 15% and reduce the personal income tax rate for those earning under $100K. This might also assist in easing the pressure on current high costs of living and go someway towards alleviating the debt crisis. I would also recommend abolition of the fuel excise to reduce petrol prices.

Those who consume the most would pay more tax via the GST. It would only work if there was no exemption for corporate purchases like the company yacht so that those who normally avoid tax would not be excluded.

Some possible problems might be: would petrol prices reduce if tax was removed or would there be a risk that petrol companies would take advantage? Would increasing real income mean inflation goes up and with it interest rates? I would hope that increasing GST on non-essential/luxury items might reduce spending but I may be wrong.

I have not got my head fully around this but as a concept do you think it might work? What might be some problems that I have not thought of?

And any other ideas to make taxation fairer?

pelican the purpose of tax is to finance the necessary work of government.

So what is the role of government: to provide for the military defence of the nation and the infrastructural niceties required to enact legislation, pay the law makers and judges, and pay for other regulators.

The debate is still on about how far a government should be involved in housing, health and education, thus how much tax should be raised and how much of those discretionary services should be funded direct by the user.

In none of that do I see any motivation for the tax system to be “fair” or “fairer”.

Tax is not a system suitable for the re-distribution of wealth. If it were communism would have worked and it obviously never has.

The pretend role of socialist government, to cosset everyone from cradle to grave, has been proven not to work and to be as big a lie and a fraud as the communists. Nationalization of segments of economic activity never benefited any but a few of the favoured.

So for me, the best tax system is the simplest system, funding the necessary work of small government instead of the pandering excesses of big government.

In absolute terms, the simplest is a pole tax, everyone pays so much for the privilege of being here.

I can see the obvious disadvantages of using just a pole tax, so do not suggest it as am absolute solution.

"Would it work to increase the rate of GST on luxury items (not essentials of course) to about 15% and reduce the personal income tax rate for those earning under $100K. "

That would only complicate things and thus, I am against it from a simplicity point of view
Plus my ethical view, you should not use differential taxes to redistribute the pain of taxation unevenly across society.

I believe we should consider:

Get rid of FBT. Its is complex relative to the revenue it generates.
Get rid of land taxes, as was supposed to happen with the intro of GST
Get rid of excises.

To “help” the less able, increase personal tax thresholds.
Keep income tax but match company tax and personal tax rates to a one common rate.

On the saving side of government (which all those taxes are used for)

Retrench all the “planners” who pretend to administer for the benefit of the tax payer and remove government from much of its meddling, returning it to a regulatory authority, instead of a commercially participative entity.

Stop all government loans and grants to business.
Reduce the size of the ATO and other bureaucracies to suit their reduced role.

Retain CGT, it helps, as we do not have death duties (crystalisation effect).
Retain dividend imputation.
Consider a death duty / inheritance tax.

That is not a definitive list but just a suggestion of where and what to start with.

I think you raise a point which is a very important opportunity for making everyone’s life easier and the government of the country more transparent and possibly even more effective

Thanks Col you raise some good points - it might be better to raise the personal tax thresholds (rather than increase GST on luxury items) to provide relief for lower income earners. The GST was marketed as being the tax to end all other taxes but this did not happen and there is an amazing array of hidden State and Commonwealth taxes.

I had read something about this the other day and it got me thinking about the fairness aspect but as you rightly say the motivation is not fairness but how to accumulate the funds to pay for necessary infrastructure and services.

It made me wonder if there was someway to evenly distribute the burden particularly at the top end where legitimate tax evasion is possible. Corporate welfare costs the taxpayer millions each year whether it be via taxation incentives or other devices.

The Australian taxation system is certainly complex and overly bureacratic and logic suggests that there must be a better way.

Taxation was not one of the big ticket items at the Summit and I have not read about it in much detail (could not find anything much on the www.2020Australia.gov.au website on this issue).

Dear pelican,

The following website may be of interest to you and other
posters:

http://petermartin.blogspot.com/2008/04/tuesday-column-budget-night-when-will.html

Pelican “where legitimate tax evasion is possible.”

I will correct you on this point:

“Legitimate tax evasion” is an oxymoron, if it is “evasion” it cannot be “legitimate”.

I think you mean “avoidance”.

The best justification which supports people who seek to take all measures possible to avoid paying tax was stated my Lord Denning in UK who observed (paraphrase), tax is an imposition and a person is at liberty to take all the means legally possible to avoid any imposition.

Denning is basically saying we have a civic duty to pay tax but to pay no more tax than we are legally obliged to. I humbly agree with him.

“Taxation was not one of the big ticket items at the Summit and I have not read about it in much detail”

I was fortunately away on a pacific cruise when it all happened and probably did myself more good by quafting large amounts of food and alcohol than developing angst over Krudds waste of money talk fest.

That “tax” was not on the agenda does not surprise me despite its significance when it is the enabling facility for Krudd to fund all his other agenda items.
I figure, reading the Australia 2020 summit topics, the main thrust was a parade of airy-fairy, cotton–candy feel good notions around ethereal life qualities and things people only identify with in a most remote manner, rather than the nuts and bolts of everyday living and paying tax is one of them nuts and bolts which holds the nation together.

The Australian governments excise around 31.5% of GDP from the wage packets and incomes of real people.

I would suggest “tax” is about as efficient a means of economic management as a power station is at converting the energy potential of coal into electricity (around 30-35% on a good day).

I am happy to challenge any politician to justify the exhorbitant level of taxes we are shackled with, relative to the "Real" services which are delivered.